EUR/USD Forecast: Euro bulls show no interest
- EUR/USD struggles to gain traction on the first trading day of 2026.
- The pair's action could remain subdued heading into the weekend.
- The technical outlook points to a loss of bullish momentum in the short term.
Following a recovery attempt in the early trading hours on Friday, EUR/USD lost its traction and retreated slightly below 1.1750. The pair could have a difficult time gathering directional momentum as trading conditions are likely to remain thin in between the New Year holiday and the weekend.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.16% | 0.28% | 0.38% | 0.10% | 1.24% | 0.58% | |
| EUR | -0.24% | -0.08% | 0.04% | 0.14% | -0.15% | 0.99% | 0.33% | |
| GBP | -0.16% | 0.08% | 0.27% | 0.22% | -0.07% | 1.08% | 0.40% | |
| JPY | -0.28% | -0.04% | -0.27% | 0.10% | -0.18% | 0.94% | 0.29% | |
| CAD | -0.38% | -0.14% | -0.22% | -0.10% | -0.24% | 0.85% | 0.18% | |
| AUD | -0.10% | 0.15% | 0.07% | 0.18% | 0.24% | 1.15% | 0.46% | |
| NZD | -1.24% | -0.99% | -1.08% | -0.94% | -0.85% | -1.15% | -0.67% | |
| CHF | -0.58% | -0.33% | -0.40% | -0.29% | -0.18% | -0.46% | 0.67% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Earlier in the week, the modest US Dollar (USD) recovery caused EUR/USD to edge lower. In the absence of fundamental drivers, profit-taking toward the end of the year may have caused the USD to gather strength.
In the new year, the potential policy divergence between the Federal Reserve (Fed) and the European Central Bank (ECB) could remain as the primary driver of EUR/USD's action. While the Fed is widely seen is adopting a dovish stance to support the labor market, the ECB is expected to remain patient, with the European economy showing resilience and inflation holding steady.
The economic calendar will not offer any high-impact data releases on Friday.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) has turned lower and now sits beneath the 50 SMA, while price stays below these short-term gauges. The 50-, 100-, and 200-period SMAs edge higher, with price above the latter two, keeping the broader bias mildly positive despite near-term softness. The Relative Strength Index (RSI) stands at 42.76, below the 50 midline and signaling waning momentum.
Measured from the 1.1503 low to the 1.1800 high, the 23.6% retracement and the 100-period SMA form a support area at 1.1730-1.1740. With a drop below this region, the 38.2% retracement at 1.1687 could be seen as the next support before 1.1665 (200-period SMA). Immediate resistance aligns at 1.1755-1.1760 (20-period SMA, 50-period SMA), followed by 1.1800 (end-point of the uptrend) and 1.1840 (static level).
(The technical analysis of this story was written with the help of an AI tool)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
